[Good Morning Stock Market] Will Foreigners Continue Buying Semiconductors... Downward Pressure Due to Mixed US Market Sentiment

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] The New York stock market showed mixed results across indices amid weak private employment data. On the 4th (Eastern Time), at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed down 323.73 points (0.92%) from the previous session at 34,792.67. The Standard & Poor's (S&P) 500 index fell 20.49 points (0.46%) to 4,402.66, while the tech-heavy Nasdaq index rose 19.24 points (0.13%) to close at 14,780.53.

Investors focused on the private employment data released that day, corporate earnings reports, and movements in Treasury yields. Private employment figures released by ADP were weaker than expected, lowering expectations for the July employment report from the Labor Department. The market anticipates that the Labor Department's July nonfarm payrolls will be around 845,000, similar to June's 850,000. The weak ADP employment data strengthened the outlook that the official employment report would also be disappointing.

Concerns over the spread of the COVID-19 Delta variant increased, and with weak data, fears of early tightening by the Federal Reserve (Fed) eased somewhat. The global cumulative number of COVID-19 cases has surpassed 200 million, and according to The New York Times' tally, the U.S. reported an average of about 92,000 new cases per day on the 3rd. This represents a 139% increase compared to two weeks ago.

◆ Sangyoung Seo, Researcher at Mirae Asset Securities = The U.S. stock market started lower due to weak private employment data and then saw a wider decline following somewhat hawkish remarks by Fed Vice Chair Clarida. The COVID-19 Delta variant issue also contributed to the decline. Particularly, sectors such as hotels, leisure, airlines, industrials, and energy underperformed, while software related to untact (contactless), semiconductors, and medical devices showed strength, leading to sector differentiation and a rise in the Nasdaq.

The Korean stock market is expected to open slightly lower on the 5th. Recently, foreign investors have driven index gains by actively buying individual semiconductor stocks in the Korean market. However, it is important to note that the semiconductor sector's strength emerged after individual corporate factors and the increased possibility of Nvidia's failure to acquire ARM became apparent. Even if the acquisition fails, cooperation to overcome this has been highlighted. Considering this, foreign buying in the semiconductor sector is unlikely to expand significantly, and a process of digesting sell orders is expected after a lower opening.

◆ Yumi Kim, Researcher at Kiwoom Securities = The Korean stock market is expected to face downward pressure due to U.S.-originated uncertainties such as slowing U.S. employment and hawkish remarks from the Fed Vice Chair. However, considering that large tech stocks like AMD and Nvidia performed relatively well in the previous U.S. trading session, differentiated sectoral supply-demand conditions and stock price trends are expected in the domestic market as well.

Meanwhile, foreign investors, who had aggressively net sold over 24 trillion won from the beginning of the year through July, have recently been net buyers mainly in semiconductor stocks. There is growing anticipation of net buying in sectors like semiconductors and automobiles, where positions had been relatively light. While it is true that foreign net selling was excessive, it is believed that they are likely to increase their weighting in the Korean stock market going forward. However, it is necessary to consider the possibility that buying intensity may weaken on this day.